giofranchi Posted October 23, 2015 Author Share Posted October 23, 2015 What's going on here? Is Evercore wrong or is Valeant wrong? I hope next monday we will finally know. http://ir.valeant.com/investor-relations/news-releases/news-release-details/2015/Valeant-Pharmaceuticals-To-Hold-Investor-Conference-Call-On-October-26-2015/default.aspx Cheers, Gio Link to comment Share on other sites More sharing options...
Liberty Posted October 23, 2015 Share Posted October 23, 2015 Insider Ron Farmer buying 1500 shares in the open market. Not sure how big that is for him, don't know how much capital he has.. https://www.canadianinsider.com/company?menu_tickersearch=Vrx http://www.valeant.com/about/board-of-directors/ronald-h-farmer Link to comment Share on other sites More sharing options...
KCLarkin Posted October 23, 2015 Share Posted October 23, 2015 merkhet, evercore is wrong on consolidating R&O. Or rather, he states that NO emphatically but later seems to contradict. "We don't know" seems to be his conclusion. Link to comment Share on other sites More sharing options...
ourkid8 Posted October 23, 2015 Share Posted October 23, 2015 Great! I have made Valeant one of the largest positions in my portfolio. It seems the blackout period is over, let's hope they are also repurchasing stock as well... :-) Insider Ron Farmer buying 1500 shares in the open market. Not sure how big that is for him, don't know how much capital he has.. https://www.canadianinsider.com/company?menu_tickersearch=Vrx http://www.valeant.com/about/board-of-directors/ronald-h-farmer Link to comment Share on other sites More sharing options...
ZenaidaMacroura Posted October 23, 2015 Share Posted October 23, 2015 So when Philidor sued R&O, this was page '3 of 4' of R&O reply. https://pbs.twimg.com/media/CR_8FuVUYAEjg5N.jpg It seems whoever speculated that R&O was playing cute with Valeant is onto something? I'm not a legal person but is it valid/plausible to withhold a bunch of payments because you think someone is misrepresenting you? Link to comment Share on other sites More sharing options...
original mungerville Posted October 23, 2015 Share Posted October 23, 2015 I've only had a chance to read it very quickly, but the latest Evercore ISI report by Umber Raffat is really worth checking out. Untangles a lot of stuff and rules out some accusations. Also interesting info that Philidor bought 10% of R/O for $350k. These things are tiny. No wonder that a large cap might not have disclosed them as material and lumped them with other tiny deals. I've only seen the screenshot, but it seems like Evercore says that Philidor does not consolidate R&O. However, Valeant says that it consolidates both Philidor & R&O. What's going on here? Is Evercore wrong or is Valeant wrong? Merkhet, Don't assume Valeant can not consolidate both of Philidor and R&O under the VIE rules while Philidor should not consolidate R&O. You are assuming (and I was thinking similarly at one point in the last day or so) that that would have to be the case, and it would generally have to be the case for non-VIE subsidiaries in a corporate structure. But those VIE rules are not straight-forward, and apparently Valeant inventories go directly to R&O and so for that reason or some other reason, its highly possible that under the VIE test, Valeant has to consolidate both Philidor and R&O, but Philidor does not have to consolidate R&O. Its not necessarily a question of who is lying, or whether its one or the other. This would be my guess. Link to comment Share on other sites More sharing options...
original mungerville Posted October 23, 2015 Share Posted October 23, 2015 So when Philidor sued R&O, this was page '3 of 4' of R&O reply. https://pbs.twimg.com/media/CR_8FuVUYAEjg5N.jpg It seems whoever speculated that R&O was playing cute with Valeant is onto something? I'm not a legal person but is it valid/plausible to withhold a bunch of payments because you think someone is misrepresenting you? I was saying they were getting cute:The Evercore slide I saw suggest Valeant actually delivers inventory straight to R&O. And R&O has to know they are selling Valeant product. Link to comment Share on other sites More sharing options...
Happy Posted October 23, 2015 Share Posted October 23, 2015 I consider it very unlikely that the biggest accusations are true for the following reasons: - Pearson is not a slick promoter that came out of nowhere. He was handpicked by ValueAct and they followed him on the board since he started. It just seems very unlikely that they set in a fraudster and not notice anything for such a long time. - Incentives are very important. Pearson doesn't receive a salary and can't sell his stock until after he retired. If you commit major fraud you probably want to live nice and spend the money and not end up with everything in worthless stock in the end. That part of their sales came from these specialty pharma channels was probably sure to come out eventually. - Greenberg also owns Express Scripts which is a major player in the specialty pharma area so he knows that space forwards and backwards. I can't imagine that he didn't know about this. And after the news comes out and the stock tanks hard, he buys even more stock (surely after analyzing the situation). From what I read, quite some people consider specialty pharma the future of pharma so that they were in it just means Pearson was doing his job right (but maybe they pushed it too far) and the fact that not every company (but many) used it makes his explanation of "disguising their competitive advantage" plausible. Apple holds back information about the watch as well for competitive reasons. I am no expert on whether they had to disclose it. Surely it makes them look bad, but their explanation probably holds up when Greenberg bought more after the news was out. It's interesting how much the Citron report moved the market when Pearson said in the Q2 call that they have only $50 mio in inventory in specialty pharma (no channel stuffing) and that revenue is only recognized when it the actual prescription is filled with the patient. He basically refuted those points before Citron issued the report. But I guess Mr. Market just doesn't believe him anymore. Account receivables also didn't go up significantly more than the growth rate so the channel stuffing accusation seems baseless unless Pearson is flat out lieing. I guess the most likely explanation really is that someone at R&O or Philidor did something bad and thought Valeant wasn't going to disclose these entities or for whatever reason and suddenly it reflects really bad on Valeant because the entities look suspicious and there even is something going wrong at them. The amounts regarding the lawsuit seem small so my best guess is that whatever happened either is very small or the wrongdoing without the approval of Valeant's management. I guess we will find out soon enough. Unless there really is a huge fraud going on (which I don't believe) the current price more than compensates for the additional risk so I kept adding shares. Mr Market hates uncertainty and there certainly is a lot of that here at least until the conference call. The shortseller also strikes me as very sensationalist. And his price targets of first $125 and then $50 are thrown around without any valuation whatsoever. I sure would pick the analysis of some of the top value guys over someone like that any day. Link to comment Share on other sites More sharing options...
KCLarkin Posted October 23, 2015 Share Posted October 23, 2015 For those that don't know, the fact that this research is coming from Evercore is important. Evercore provides independent research, so it is not conflicted (like the shorts or the investment banks). Regardless, the facts speak for themselves. I am buying more today. Link to comment Share on other sites More sharing options...
merkhet Posted October 23, 2015 Share Posted October 23, 2015 Merkhet, Don't assume Valeant can not consolidate both of Philidor and R&O under the VIE rules while Philidor should not consolidate R&O. You are assuming (and I was thinking similarly at one point in the last day or so) that that would have to be the case, and it would generally have to be the case for non-VIE subsidiaries in a corporate structure. But those VIE rules are not straight-forward, and apparently Valeant inventories go directly to R&O and so for that reason or some other reason, its highly possible that under the VIE test, Valeant has to consolidate both Philidor and R&O, but Philidor does not have to consolidate R&O. Its not necessarily a question of who is lying, or whether its one or the other. This would be my guess. Oh, I didn't presume any ill intent (i.e. lying). It's just a little confusing. But what you mentioned is a possibility. Optically, it might be worse for Valeant to have accounting "control" over R&O though. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted October 23, 2015 Share Posted October 23, 2015 http://vinodkothari.com/fin46vk/ Given the current information we basically know that this could be anywhere from a huge problem to no problem at all (ignoring the CA issue). It's fun to speculate, but it's worth mentioning that no one has enough information to know whether they are right or wrong about the VIEs yet (unless you have unreleased documents in your possession). I've only had a chance to read it very quickly, but the latest Evercore ISI report by Umber Raffat is really worth checking out. Untangles a lot of stuff and rules out some accusations. Also interesting info that Philidor bought 10% of R/O for $350k. These things are tiny. No wonder that a large cap might not have disclosed them as material and lumped them with other tiny deals. I didn't think Evercore's presentation was anymore interesting or worthwhile than anyone else's on the topic. Why do you think it is a must-read? Maybe you could share the whole presentation if possible? We have no idea how large R&O, West Wilshire, and other specialty pharmas are (or the ownership stakes of any of them). Philidor has at least ~$400m - $800m in annual revenue (ballpark guessing - assuming 100% ownership and VRX's disclosure of 10-20% revenue of US branded drugs). It could also be 75% ownership and 13.3% - 26.7% rev or another equivalent combination that meets the definition of VIE. However, if R&O is filling all of VRX's CA prescriptions then the $3.5m valuation is either outdated or fishy. By the way, when do you think we'll get a balance sheet? That part is becoming very Enron-like. Does any other company take this long to release a balance sheet after their quarterly conference call? Link to comment Share on other sites More sharing options...
giofranchi Posted October 23, 2015 Author Share Posted October 23, 2015 I am buying more today. I also added some today. But I am waiting for monday's call, before adding even more. Cheers, Gio Link to comment Share on other sites More sharing options...
lessthaniv Posted October 23, 2015 Share Posted October 23, 2015 I've picked up some long dated calls. Willing to part with the capital on a (unexpected) negative outcome but has the potential for multiples if this works out the way I think. Link to comment Share on other sites More sharing options...
KCLarkin Posted October 23, 2015 Share Posted October 23, 2015 By the way, when do you think we'll get a balance sheet? That part is becoming very Enron-like. Does any other company take this long to release a balance sheet after their quarterly conference call? They might be a bit busy over at Valeant HQ. Link to comment Share on other sites More sharing options...
KCLarkin Posted October 23, 2015 Share Posted October 23, 2015 Philidor: Valeant’s Brilliant Apple Store Strategy Steve Jobs, the co-founder of Apple, returned as interim CEO in 1997. According to Jobs biographer Walter Isaacson, Jobs began a concerted campaign to help sales by improving the retail presentation of Macintosh computers. Even with new products launched under Jobs' watch like the iMac and the PowerBook G3 and an online store, Apple still relied heavily on big box computer and electronics stores for most of their sales. There, customers continued to deal with poorly trained and ill-maintained Mac sections that did not foster customer loyalty to Apple and did not help differentiate the Mac user-experience from Windows. In fact, the retailer trend was towards selling their own generic in-house brand PCs which used even cheaper components than those by major PC makers, increasing retailer overall margins by keeping the manufacturing profits. This "provided a powerful profit motive to convert customers interested in buying a Mac into the owners of a new, cheaply assembled, house brand PC". -- Wikipedia Recognizing the limitations of third party retailers, Steve Jobs launched a captive retail network. The Apple Store is now the most profitable retailer in the world. Valeant, recognizing the limitations of 3rd party pharmacies, launched a captive pharmacy network named Philidor. This specialty pharmacy helps patients and doctors to navigate the complex insurance landscape, provides co-pay assistance, and helps patients adhere to their prescriptions. As a captive pharmacy, Philidor provides a level of service that 3rd party pharmacies are unwilling or unable to provide (Valeant’s equivalent of the Genius Bar). Philidor is a powerful strategic advantage for Valeant. By providing co-pay assistance, Valeant makes drugs more affordable for its patients. By making it easier for doctors to prescribe complicated drugs, Valeant gets more scripts. And by handling prescriptions through a captive pharmacy, Valeant reduces generic substitution. This strategy has worked brilliantly. Jublia, in particular, is a blockbuster thanks to a combination of Direct-to-Consumer advertising and Philidor. Mike Pearson knew this strategy was “checkmate” -- Philidor was even named after a chess move,. Importantly, this is a strategy not employed by Valeant’s competitors. To maintain this competitive advantage, Valeant attempted to keep the relationship with Philidor shrouded in secrecy. Philidor is a “special purpose entity”. Legally independent from Valeant, it is controlled via contractual and financial agreements. Special purpose entities are legitimate corporate structures, but were famously used by Enron to perpetrate a massive fraud. Unfortunately, this desire for secrecy came at a cost. When Philidor attempted to get licensed in California, they were denied because Philidor attempted to hide the true ownership of Philidor. To get around this, Philidor (via a shell name Isolani), entered into an agreement to purchase R&O, a pharmacy with a California license. As part of the purchase agreement, R&O granted Isolani all management of the pharmacy. Russell Reitz, the owner of R&O, was retained as the “Pharmacist-in-Charge” of R&O. The strategy was flawless. Millions of dollars in prescriptions were filled by R&O. Then Russell Reitz went rogue. He started withholding reimbursement cheques from insurance companies. He stopped communicating with Isolani. Lawyers were hired. Valeant demanded payment. Lawsuits were filed. Reitz’ motivations to go rogue are unclear. There are two current theories. After seeing the volume of business going through R&O, he attempted to negotiate a higher purchase price. Or, he became uncomfortable with the regulatory risk and tried to back out. Either way, he is holding millions of dollars hostage. Dollars that belong to Valeant and sit on their balance sheet as accounts receivable. A number of short sellers (Roddy Boyd, John Hempton), started to sniff out some of the details. They were unable to really connect the dots but things looked fishy. Then Andrew Left, a short seller, released a sensational report claiming that Valeant was using special purpose entities to create sham transactions. Valeant, he claims, is a pharmaceutical Enron. Despite a lack of evidence, Left was widely quoted in the Wall Street Journal and interviewed by the financial news stations. The stock, already weak, collapsed. Falling as much as 40% in a single day. Unfortunately, Left’s theory was pure fiction. Evercore, an independent equity research firm, uncovered a vast paper trail proving that there were no sham transactions. Invoices, shipping reports, emails, purchase agreements were easily found. Of course, the damage to investor sentiment was already done. A short seller, with no evidence, enriched himself at the expense of numerous innocent investors. Philidor is a brilliant strategy, well executed. Unfortunately, the PR hit on this issue may force Valeant to abandon a winning strategy. --- Note: This is my narrative based on the facts available. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted October 23, 2015 Share Posted October 23, 2015 By the way, when do you think we'll get a balance sheet? That part is becoming very Enron-like. Does any other company take this long to release a balance sheet after their quarterly conference call? They might be a bit busy over at Valeant HQ. Too busy to provide a balance sheet with earnings?! They should have these balances available on a daily basis. Are you being sarcastic? Link to comment Share on other sites More sharing options...
loganc Posted October 23, 2015 Share Posted October 23, 2015 By the way, when do you think we'll get a balance sheet? That part is becoming very Enron-like. Does any other company take this long to release a balance sheet after their quarterly conference call? They might be a bit busy over at Valeant HQ. Too busy to provide a balance sheet with earnings?! They should have these balances available on a daily basis. Are you being sarcastic? There is nothing different in terms of the disclosure provided in the 8K for the earnings release with respect to the balance sheet. The full statements will be included in the 10Q. Given the nature of the situation, I imagine that the 10Q will be released on Monday afternoon. Perhaps that is a bit of a longer delay, but I doubt they are going to file the 10Q before the Monday call. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted October 23, 2015 Share Posted October 23, 2015 Source for the Apple comparison? How come VRX always has to be compared to Malone companies, Berkshire, or Apple? Why can't folks just describe the business model without a comparison? Do you think we would have come to the same conclusion if they didn't mention Apple stores (which is a pretty weird comparison given the products each sells)? It's amazing how much the VRX long thesis has changed in just a few weeks. It seems like shareholders are happy that VRX lied to them about their black-box distribution network. Consider the lawsuit for $69m in WAC or $25m in net revenue. That sounds like a wholesale deal. You should look into the grey market of pharmaceutical distribution. Can someone share the Evercore presentation? Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted October 23, 2015 Share Posted October 23, 2015 By the way, when do you think we'll get a balance sheet? That part is becoming very Enron-like. Does any other company take this long to release a balance sheet after their quarterly conference call? They might be a bit busy over at Valeant HQ. Too busy to provide a balance sheet with earnings?! They should have these balances available on a daily basis. Are you being sarcastic? There is nothing different in terms of the disclosure provided in the 8K for the earnings release with respect to the balance sheet. The full statements will be included in the 10Q. Given the nature of the situation, I imagine that the 10Q will be released on Monday afternoon. Perhaps that is a bit of a longer delay, but I doubt they are going to file the 10Q before the Monday call. I guess I don't understand, what do you mean there is no difference? They did this last quarter as well and the stock was near an all-time high in price and confidence. I don't think it's fair to blame the current situation. Link to comment Share on other sites More sharing options...
loganc Posted October 23, 2015 Share Posted October 23, 2015 By the way, when do you think we'll get a balance sheet? That part is becoming very Enron-like. Does any other company take this long to release a balance sheet after their quarterly conference call? They might be a bit busy over at Valeant HQ. Too busy to provide a balance sheet with earnings?! They should have these balances available on a daily basis. Are you being sarcastic? There is nothing different in terms of the disclosure provided in the 8K for the earnings release with respect to the balance sheet. The full statements will be included in the 10Q. Given the nature of the situation, I imagine that the 10Q will be released on Monday afternoon. Perhaps that is a bit of a longer delay, but I doubt they are going to file the 10Q before the Monday call. I guess I don't understand, what do you mean there is no difference? They did this last quarter as well and the stock was near an all-time high in price and confidence. I don't think it's fair to blame the current situation. What I mean is that there is no difference in terms of the disclosure in the 8K filing for the earnings release. Given that you have presumably done so much diligence on the company, I am surprised that you are so hung up on this particular issue. Link to comment Share on other sites More sharing options...
LongHaul Posted October 23, 2015 Share Posted October 23, 2015 Philidor: Valeant’s Brilliant Apple Store Strategy Steve Jobs, the co-founder of Apple, returned as interim CEO in 1997. According to Jobs biographer Walter Isaacson, Jobs began a concerted campaign to help sales by improving the retail presentation of Macintosh computers. Even with new products launched under Jobs' watch like the iMac and the PowerBook G3 and an online store, Apple still relied heavily on big box computer and electronics stores for most of their sales. There, customers continued to deal with poorly trained and ill-maintained Mac sections that did not foster customer loyalty to Apple and did not help differentiate the Mac user-experience from Windows. In fact, the retailer trend was towards selling their own generic in-house brand PCs which used even cheaper components than those by major PC makers, increasing retailer overall margins by keeping the manufacturing profits. This "provided a powerful profit motive to convert customers interested in buying a Mac into the owners of a new, cheaply assembled, house brand PC". -- Wikipedia Recognizing the limitations of third party retailers, Steve Jobs launched a captive retail network. The Apple Store is now the most profitable retailer in the world. Valeant, recognizing the limitations of 3rd party pharmacies, launched a captive pharmacy network named Philidor. This specialty pharmacy helps patients and doctors to navigate the complex insurance landscape, provides co-pay assistance, and helps patients adhere to their prescriptions. As a captive pharmacy, Philidor provides a level of service that 3rd party pharmacies are unwilling or unable to provide (Valeant’s equivalent of the Genius Bar). Philidor is a powerful strategic advantage for Valeant. By providing co-pay assistance, Valeant makes drugs more affordable for its patients. By making it easier for doctors to prescribe complicated drugs, Valeant gets more scripts. And by handling prescriptions through a captive pharmacy, Valeant reduces generic substitution. This strategy has worked brilliantly. Jublia, in particular, is a blockbuster thanks to a combination of Direct-to-Consumer advertising and Philidor. Mike Pearson knew this strategy was “checkmate” -- Philidor was even named after a chess move,. Importantly, this is a strategy not employed by Valeant’s competitors. To maintain this competitive advantage, Valeant attempted to keep the relationship with Philidor shrouded in secrecy. Philidor is a “special purpose entity”. Legally independent from Valeant, it is controlled via contractual and financial agreements. Special purpose entities are legitimate corporate structures, but were famously used by Enron to perpetrate a massive fraud. Unfortunately, this desire for secrecy came at a cost. When Philidor attempted to get licensed in California, they were denied because Philidor attempted to hide the true ownership of Philidor. To get around this, Philidor (via a shell name Isolani), entered into an agreement to purchase R&O, a pharmacy with a California license. As part of the purchase agreement, R&O granted Isolani all management of the pharmacy. Russell Reitz, the owner of R&O, was retained as the “Pharmacist-in-Charge” of R&O. The strategy was flawless. Millions of dollars in prescriptions were filled by R&O. Then Russell Reitz went rogue. He started withholding reimbursement cheques from insurance companies. He stopped communicating with Isolani. Lawyers were hired. Valeant demanded payment. Lawsuits were filed. Reitz’ motivations to go rogue are unclear. There are two current theories. After seeing the volume of business going through R&O, he attempted to negotiate a higher purchase price. Or, he became uncomfortable with the regulatory risk and tried to back out. Either way, he is holding millions of dollars hostage. Dollars that belong to Valeant and sit on their balance sheet as accounts receivable. A number of short sellers (Roddy Boyd, John Hempton), started to sniff out some of the details. They were unable to really connect the dots but things looked fishy. Then Andrew Left, a short seller, released a sensational report claiming that Valeant was using special purpose entities to create sham transactions. Valeant, he claims, is a pharmaceutical Enron. Despite a lack of evidence, Left was widely quoted in the Wall Street Journal and interviewed by the financial news stations. The stock, already weak, collapsed. Falling as much as 40% in a single day. Unfortunately, Left’s theory was pure fiction. Evercore, an independent equity research firm, uncovered a vast paper trail proving that there were no sham transactions. Invoices, shipping reports, emails, purchase agreements were easily found. Of course, the damage to investor sentiment was already done. A short seller, with no evidence, enriched himself at the expense of numerous innocent investors. Philidor is a brilliant strategy, well executed. Unfortunately, the PR hit on this issue may force Valeant to abandon a winning strategy. --- Note: This is my narrative based on the facts available. KC Larkin - your theory may be right but I think the odds of your theory are extremely low. I would put it at less than 1%. I have not seen the Evercore piece. Bad analogy, Steve jobs obeyed and respected the laws of the US. Why did R&O sue then and make it public and air everything? That is the last thing they should do to resolve a commercial dispute where there are serious legal and fraud questions. I heard from my previous research that the R&O owners had gotten really pissed off at the Philidor mgmt because of the billing issues. R&O ended up losing big insurance contracts as a result. This information posted basically confirms that. Then to get back at Philidor/VRX they filed the lawsuit. https://pbs.twimg.com/media/CR_8FuVUYAEjg5N.jpg From my research Philidor seems like a cesspool on so many levels. And a cesspool may be an understatement. The more I learn and dig the more stuff I find. A lot of bad stuff is not even out or understood yet. If you mix a business model that does't work in the long term with an energetic CEO who has no problem with deceit what do you get? A lot of you seem to be caught up with who owns the stock, who is saying what. All of that is noise and totally irrelevant to the facts and truth. FOCUS ON THE FACTS. Don't outsource your thinking to anyone. Link to comment Share on other sites More sharing options...
KCLarkin Posted October 23, 2015 Share Posted October 23, 2015 KC Larkin - your theory may be right but I think the odds of your theory are extremely low. I would put it at less than 1%. I have not seen the Evercore piece. Bad analogy, Steve jobs obeyed and respected the laws of the US. What part of my theory is wrong? 99% of it is based on known facts. I added some narrative to tie the facts together, sure. The only real speculation is why Valeant didn't disclose Philidor. I was skeptical about Valeant's claims that they hid this relationship for competitive reasons, but when I thought about how powerful the captive pharmacy strategy is, it became plausible. Especially since competitors were so quick to disclose that they had no captive pharmacies. I also originally assumed that Philidor was setup to skirt regulatory and ethical issues. But I just couldn't get the facts to fit that narrative. Philidor is providing real benefits to doctors and patients. Are they operating in a legal grey area? Probably. And I thought the Steve Jobs analogy was actually fitting: http://www.fundamentalfinance.com/opinion/apple-options-backdating-scandal.php https://pando.com/2014/03/22/revealed-apple-and-googles-wage-fixing-cartel-involved-dozens-more-companies-over-one-million-employees/ http://www.reuters.com/article/2015/06/30/us-apple-ebooks-decision-idUSKCN0PA1RS20150630 http://www.pcworld.com/article/2933872/apple-music-faces-antitrust-investigation-in-new-york-connecticut.html Link to comment Share on other sites More sharing options...
Liberty Posted October 23, 2015 Share Posted October 23, 2015 KC Larkin - your theory may be right but I think the odds of your theory are extremely low. I would put it at less than 1%. I have not seen the Evercore piece. Bad analogy, Steve jobs obeyed and respected the laws of the US. What part of my theory is wrong? 99% of it is based on known facts. I added some narrative to tie the facts together, sure. The only real speculation is why Valeant didn't disclose Philidor. I was skeptical about Valeant's claims that they hid this relationship for competitive reasons, but when I thought about how powerful the captive pharmacy strategy is, it became plausible. Especially since competitors were so quick to disclose that they had no captive pharmacies. I also originally assumed that Philidor was setup to skirt regulatory and ethical issues. But I just couldn't get the facts to fit that narrative. Philidor is providing real benefits to doctors and patients. Are they operating in a legal grey area? Probably. And I thought the Steve Jobs analogy was actually fitting: http://www.fundamentalfinance.com/opinion/apple-options-backdating-scandal.php https://pando.com/2014/03/22/revealed-apple-and-googles-wage-fixing-cartel-involved-dozens-more-companies-over-one-million-employees/ http://www.reuters.com/article/2015/06/30/us-apple-ebooks-decision-idUSKCN0PA1RS20150630 http://www.pcworld.com/article/2933872/apple-music-faces-antitrust-investigation-in-new-york-connecticut.html Evercose says that the 10% of R/O that Philidor bought cost them $350k. Now, even if Philidor is much bigger than R/O, isn't it possible that Philidor just isn't that big compared to a large cap and the option to buy control would fall in the bucket where Valeant puts non-material deals that they don't disclose because they're too small? This would make sense if Philidor moves a lot of product but only captures a very tiny slice as margin, making the business not worth that much compared to its revenues. Link to comment Share on other sites More sharing options...
KCLarkin Posted October 23, 2015 Share Posted October 23, 2015 Bad analogy, Steve jobs obeyed and respected the laws of the US. Actually, I originally saw the analogy when I read this article: http://www.cnbc.com/2015/10/22/the-big-costs-behind-googles-moonshot-start-ups.html Apple spent $6.04 billion on R&D in 2014, a little more than 3 percent of its top line. Yahoo spent $885 million, or 18 percent of revenue. Suddenly, Valeant's claims about R&D efficiency didn't seem so far-fetched. Link to comment Share on other sites More sharing options...
Liberty Posted October 23, 2015 Share Posted October 23, 2015 Bad analogy, Steve jobs obeyed and respected the laws of the US. Actually, I originally saw the analogy when I read this article: http://www.cnbc.com/2015/10/22/the-big-costs-behind-googles-moonshot-start-ups.html Apple spent $6.04 billion on R&D in 2014, a little more than 3 percent of its top line. Yahoo spent $885 million, or 18 percent of revenue. Suddenly, Valeant's claims about R&D efficiency didn't seem so far-fetched. I don't understand why people insist on measuring R&D by inputs rather than outputs. Never made any sense. And hey, once your mindset becomes focused on outputs, then it starts to become clearer that sometimes it's better to buy someone else's embedded R&D through M&A if you can get it at a good price and/or a lower risk profile... Link to comment Share on other sites More sharing options...
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